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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22970
NETWORK IMAGING CORPORATION
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-1590649
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(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
500 HUNTMAR PARK DRIVE, HERNDON, VIRGINIA 20170
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(Address of principal executive offices)
(703) 478-2260
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. YES /X/ / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of outstanding shares of the issuer's Common Stock, $.0001 par
value, as of July 19, 1996 was 21,057,428.
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NETWORK IMAGING CORPORATION
FORM 10-Q/A
Table of Contents
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K 2
Item 6. Exhibits
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(a) 4.a Convertible Preferred Stock Purchase Agreement between
Network Imaging Corporation and Newsun Limited dated as of June
28, 1996.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETWORK IMAGING CORPORATION
(Registrant)
Date: August 6, 1996 By
--------------------------------------
James Leto
President and Chief Executive Officer
Date: August 6, 1996 By
--------------------------------------
Jorge R. Forgues
Vice President of Finance and
Administration, Chief Financial Officer
and Treasurer
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EXHIBIT 4.a
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
By and Among
NETWORK IMAGING CORPORATION
and
NEWSUN LIMITED
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Dated as of June 28, 1996
- ------------------------------
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TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I CERTAIN DEFINITIONS . . . . . . . . . . . . . . 1
Section 1.1. Certain Definitions. . . . . . . . . . . . 1
ARTICLE II PURCHASE OF SHARES. . . . . . . . . . . . . . . 3
Section 2.1. Purchase of Shares; Closing. . . . . . . . 3
ARTICLE III REPRESENTATIONS AND WARRANTIES. . . . . . . . . 4
Section 3.1. Representations and Warranties of the
Company. . . . . . . . . . . . . . . . . . 4
Section 3.2. Representations and Warranties of the
Purchaser. . . . . . . . . . . . . . . . . 8
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES . . . . . . . . 10
Section 4.1. Transfer Restrictions. . . . . . . . . . . 10
Section 4.2. Stop Transfer Instruction. . . . . . . . . 11
Section 4.3. Furnishing of Information. . . . . . . . . 11
Section 4.4. Notice of Certain Events . . . . . . . . . 11
Section 4.5. Copies and Use of Disclosure Materials . . 12
Section 4.6. Modification to Disclosure Materials . . . 12
Section 4.7. Blue Sky Laws. . . . . . . . . . . . . . . 12
Section 4.8. Integration. . . . . . . . . . . . . . . . 12
Section 4.9. Furnishing of Rule 144A Materials. . . . . 13
Section 4.10. Solicitation Materials . . . . . . . . . . 13
Section 4.11. Subsequent Financial Statements. . . . . . 13
Section 4.12. Right of First Refusal . . . . . . . . . . 13
Section 4.13. Purchaser Ownership of Common Stock. . . . 14
Section 4.14. Listing of Underlying Shares . . . . . . . 15
Section 4.15. Conversion Procedures. . . . . . . . . . . 15
ARTICLE V CONDITIONS PRECEDENT TO CLOSING . . . . . . . . 15
Section 5.1. Conditions Precedent to Obligations of
the Purchaser. . . . . . . . . . . . . . . 15
Section 5.2. Conditions Precedent to Obligations of
the Company. . . . . . . . . . . . . . . . 17
ARTICLE VI TERMINATION . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<TABLE>
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Section 6.1. Termination by Mutual Consent. . . . . . . 17
Section 6.2. Termination by the Company or the
Purchaser. . . . . . . . . . . . . . . . . 18
Section 6.3. Termination by the Company . . . . . . . . 18
Section 6.4. Termination by the Purchaser . . . . . . . 18
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . 19
Section 7.1. Fees and Expenses. . . . . . . . . . . . . 19
Section 7.2. Entire Agreement; Amendments . . . . . . . 19
Section 7.3. Notices. . . . . . . . . . . . . . . . . . 20
Section 7.4. Amendments; Waivers. . . . . . . . . . . . 20
Section 7.5. Headings . . . . . . . . . . . . . . . . . 21
Section 7.6. Successors and Assigns . . . . . . . . . . 21
Section 7.7. No Third Party Beneficiaries . . . . . . . 21
Section 7.8. Governing Law. . . . . . . . . . . . . . . 21
Section 7.9. Survival . . . . . . . . . . . . . . . . . 21
Section 7.10. Counterpart Signatures . . . . . . . . . . 21
Section 7.11. Publicity. . . . . . . . . . . . . . . . . 22
Section 7.12. Severability . . . . . . . . . . . . . . . 22
Section 7.13. Remedies . . . . . . . . . . . . . . . . . 22
</TABLE>
Exhibit A Certificate of Designation
Exhibit B Registration Rights Agreement
Exhibit C Form of Opinion of Jones & Blouch, counsel for the
Company
Exhibit D Conversion Procedures
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of June 28,
1996 (this "Agreement"), by and among Network Imaging Corporation, a Delaware
corporation (the "Company"), and Newsun Limited, a corporation organized and
existing under the laws of the British Virgin Islands (the "Purchaser").
WHEREAS, the Company desires to issue and sell to the Purchaser and
the Purchaser desires to acquire shares of the Company's Series I Convertible
Preferred Stock, par value $.0001 per share (the "Preferred Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement, and
unless the context requires a different meaning, the following terms have the
meanings indicated:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York are authorized or required by law or other government actions
to close.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in
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Section 2.1(b).
"Certificate of Designation" shall have the meaning set forth in
Section 2.1(a).
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.0001 per
share.
"Disclosure Materials" means, collectively, the SEC Documents, the
disclosure package delivered to the Purchaser in connection with the offering
by the Company of the Shares and the Schedules to this Agreement furnished by
or on behalf of the Company pursuant to Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"NASD" means the National Association of Securities Dealers, Inc.
"Per Share Consideration" shall have the meaning set forth in Section
2.1(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in
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the recitals hereto.
"Purchase Price" shall have the meaning set forth in Section 2.1(a).
"Registration Rights Agreement" means the registration rights
agreement, substantially in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in Section
3.1(f).
"SEC Documents" shall have the meaning set forth in Section 3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock purchased by the
Purchaser pursuant to this Agreement.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Underlying Shares" means the shares of Common Stock into which the
Shares are convertible in accordance with the terms hereof and the Certificate
of Designation.
ARTICLE II
PURCHASE OF SHARES
Section 2.1. Purchase of Shares; Closing.
(a) Subject to the terms and conditions herein set forth, the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company on the Closing Date 300 Shares, which shall have the
respective rights, preferences and privileges set forth in Exhibit A (the
"Certificate of Designation"), at a price per Share of US$10,000 (the "Per
Share Consideration"). The Per Share Consideration multiplied by the number of
Shares to be purchased by the Purchaser hereunder is hereinafter referred to as
the "Purchase Price."
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(b) The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Robinson Silverman Pearce
Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York 10104,
immediately following the execution hereof, or at such other time and/or place
as the Purchaser and the Company may agree, provided, however, in no case shall
the Closing take place later than the fifth day after the last of the
conditions listed in Article V is satisfied or waived by the appropriate party.
The date of the Closing is hereinafter referred to as the "Closing Date".
(c) At the Closing, (i) the Company shall deliver to the
Purchaser (A) one or more stock certificates representing the Shares purchased
hereunder, registered in the name of the Purchaser and (B) all documents,
instruments and writings required to have been delivered at or prior to Closing
by the Company pursuant to this Agreement, (ii) the Purchaser shall deliver to
the Company (A) the Purchase Price as determined pursuant to this Article I in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company prior to the Closing and (B) all
documents, instruments and writings required to have been delivered at or prior
to Closing by the Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set
forth in the SEC Documents or in Schedule 3.1(a) (collectively, the
"Subsidiaries"). Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation,
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with the full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company and the Subsidiaries, taken as
a whole (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Registration Rights Agreement and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of the Company. Each
of this Agreement and the Registration Rights Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies
or by other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company and each of the Subsidiaries is set forth in Schedule
3.1(c). No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedule 3.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Shares hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
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Common Stock, or securities or rights convertible or exchangeable into shares
of Common Stock. Neither the Company nor any Subsidiary is in violation of any
of the provisions of its respective certificate of incorporation, bylaws or
other charter documents.
(d) Issuance of Shares. The Shares are duly authorized and, when
paid for in accordance with the terms hereof, shall be validly issued, fully
paid and nonassessable. The Company has and at all times while the Shares are
outstanding will maintain an adequate reserve of shares of Common Stock to
enable it to perform its obligations under this Agreement and the Certificate
of Designation. When issued in accordance with the terms hereof, the
Underlying Shares will be duly authorized, validly issued, fully paid and
nonassessable.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its
certificate of incorporation or bylaws or (ii) subject to obtaining the
consents referred to in Section 3.1(f), conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including Federal and state securities laws and regulations), or by which any
property or asset of the Company is bound or affected, except in the case of
each of clauses (ii) and (iii), such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 3.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver,
<PAGE> 10
authorization or order of, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of
this Agreement and the Registration Rights Agreement, other than the filing of
the registration statement covering the Underlying Shares with the Commission
and the making of the applicable blue-sky filings under state securities laws,
each as contemplated by the Registration Rights Agreement and other than, in
all cases, where the failure to obtain such consent, waiver, authorization or
order, or to give or make such notice or filing, would not materially impair or
delay the ability of the Company to effect the Closing and deliver to the
Purchaser the Shares free and clear of all Liens (collectively, the "Required
Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in
the Disclosure Materials or in Schedule 3.1(g), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, State,
county, local or foreign) which (i) relates to or challenges the legality,
validity or enforceability of this Agreement, the Registration Rights Agreement
or the Shares (ii) could, individually or in the aggregate, have a Material
Adverse Effect or (iii) could, individually or in the aggregate, materially
impair the ability of the Company to perform fully on a timely basis its
obligations under this Agreement or the Registration Rights Agreement.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, except such conflicts or defaults
as do not have a Material Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do
not have a Material Adverse Effect, or (iii) is in violation of any statute,
rule or regulation of any governmental authority which could (individually or
in the aggregate) (x) adversely affect the legality, validity or enforceability
of this Agreement or the Registration Rights Agreement, (y) have a Material
Adverse Effect or (z) adversely impair the Company's ability or obligation to
perform fully on a
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timely basis its obligations under this Agreement or the Registration Rights
Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby.
(j) Disclosure Materials. The Disclosure Materials do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person acting on
its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Shares under
the Securities Act) which might subject the offering, issuance or sale of the
Shares to the registration requirements of Section 5 of the Securities Act.
(l) SEC Documents. The Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Documents") on a
timely basis, or has received a valid extension of such time of filing. As of
their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved, except as may
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be otherwise indicated in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
as of and for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited statements, to
normal year-end audit adjustments. Since the date of the financial statements
included in the Company's last filed Quarterly Report on Form 10-Q, there has
been no event, occurrence or development that has had a Material Adverse Effect
which is not specifically disclosed in any of the Disclosure Materials.
Section 3.2. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation duly
and validly existing and in good standing under the laws of the jurisdiction of
its incorporation. The Purchaser has the requisite power and authority to
enter into and to consummate the transactions contemplated hereby and by the
Registration Rights Agreement and otherwise to carry out its obligations
hereunder and thereunder. The purchase of the Shares by the Purchaser
hereunder has been duly authorized by all necessary action on the part of the
Purchaser. Each of this Agreement and the Registration Rights Agreement has
been duly executed and delivered by the Purchaser or on its behalf and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the Shares and
the Underlying Shares for its own account (and/or on behalf of managed accounts
who are purchasing solely for their own accounts for investment) for investment
purposes only and not with a view to or for distributing or reselling such
Shares or Underlying Shares or any part thereof or interest therein, without
prejudice, however, to the Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Shares or Underlying Shares under
an effective registration statement under the Securities Act and in compliance
with applicable State securities laws or under an exemption from
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such registration.
(c) Purchaser Status. At the time the Purchaser (and any account
for which it is purchasing) was offered the Shares, it (and any account for
which it is purchasing) was, and at the date hereof, it (and any account for
which it is purchasing) is, and at the Closing Date, it (and any account for
which it is purchasing) will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The Purchaser
is able to bear the economic risk of an investment in the Shares and, at the
present time, is able to afford a complete loss of such investment.
(f) Prohibited Transactions. The Shares to be purchased by the
Purchaser are not being acquired, directly or indirectly, with the assets of
any "employee benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and the merits and risks of investing
in the Shares; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment in the Common
Stock; and (iii) the opportunity to obtain such additional information which
the Company possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with respect to the
Shares and to verify the accuracy and completeness of the information contained
in the Disclosure Materials.
<PAGE> 14
(h) Reliance. The Purchaser understands and acknowledges that (i)
the Shares are being offered and sold, and the Underlying Shares are being
offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption, depends in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in Article III herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions. If the Purchaser should decide
to dispose of any of the Shares to be purchased by it hereunder (and upon
conversion thereof, any Underlying Shares), the Purchaser understands and
agrees that it may do so only (i) pursuant to an effective registration
statement under the Securities Act, (ii) to the Company or (iii) pursuant to an
available exemption from registration under the Securities Act. In connection
with any transfer of any Shares other than pursuant to an effective
registration statement or to the Company, the Company may require that the
transferor of such Shares provide to the Company an opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be, reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such Shares under the Securities Act or any State securities
laws.
The Purchaser agrees to the imprinting, so long as appropriate, of
the following legend on certificates representing
the Shares:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM
<PAGE> 15
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THEY MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THESE SECURITIES AGREES THAT IT
WILL NOT RESELL, PLEDGE OR OTHERWISE TRANSFER THESE SECURITIES OR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE, EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(B) TO NETWORK IMAGING CORP. (THE "COMPANY") OR (C) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. IF THE
PROPOSED TRANSFER IS TO BE MADE OTHER THAN PURSUANT TO CLAUSE (A) OR (B)
ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND
THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 PROMULGATED UNDER THE SECURITIES ACT.
The legend set forth above may be removed if and when the Shares
represented by such certificate or the Underlying Shares, as the case may be,
are disposed of pursuant to an effective registration statement under the
Securities Act or in the opinion of counsel to the Company experienced in the
area of United States securities laws such legend is no longer required under
applicable requirements of the Securities Act. The stock certificates
representing the Shares and the Underlying Shares shall also bear any other
legends required by applicable Federal or state securities laws, which legends
may be removed when, in the opinion of counsel to the Company experienced in
the applicable securities laws, such legends are no longer required under the
applicable requirements of such securities laws. The Company agrees that it
will provide the Purchaser, upon request, with a substitute stock certificate
or certificates, free from such legend at such time as such legend is no longer
applicable. The Purchaser agrees that, in connection with any transfer of
Shares or Underlying Shares by it pursuant to an effective registration
statement under the Securities Act, it Purchaser will comply with all
prospectus delivery requirements of the Securities Act. The Company makes no
representation, warranty or
<PAGE> 16
agreement as to the availability of any exemption from registration under the
Securities Act with respect to any resale of Shares or Underlying Shares.
Section 4.2. Stop Transfer Instruction. The Purchaser agrees
that the Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer set forth in this Agreement.
Section 4.3. Furnishing of Information. As long as the Purchaser
owns Shares or Underlying Shares, the Company will promptly furnish to it all
reports filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange
Act (or if the Company is not at the time required to file reports pursuant to
such sections, annual and quarterly reports comparable to those required by
Section 13(a) or 15(d) of the Exchange Act).
Section 4.4. Notice of Certain Events. The Company shall (i) advise
the Purchaser promptly after obtaining knowledge thereof, and, if requested by
the Purchaser, confirm such advice in writing, of (A) the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of the Shares or the Common Stock for offering or
sale in any jurisdiction, or the initiation of any proceeding for such purpose
by any state securities commission or other regulatory authority, or (B) any
event that makes any statement of a material fact made in the Disclosure
Materials untrue or that requires the making of any additions to or changes in
the Disclosure Materials in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading, (ii) use its
best efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of the Shares or the Common Stock
under any state securities or Blue Sky laws, and (iii) if at any time any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Shares or
the Common Stock under any such laws, use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
Section 4.5. Copies and Use of Disclosure Materials. The Company
shall furnish the Purchaser, without charge, as many copies of the Disclosure
Materials, and any amendments or
<PAGE> 17
supplements thereto, as the Purchaser may reasonably request. The Company
consents to the use of the Disclosure Materials, and any amendments and
supplements thereto, by the Purchaser in connection with resales of the Shares
or the Underlying Shares other than pursuant to an effective registration
statement.
Section 4.6. Modification to Disclosure Materials. If any event
shall occur as a result of which, in the reasonable judgment of the Company or
the Purchaser, it becomes necessary or advisable to amend or supplement the
Disclosure Materials in order to make the statements therein, in the light of
the circumstances at the time the Disclosure Materials were delivered to the
Purchaser, not misleading, or if it is necessary to amend or supplement the
Disclosure Materials to comply with applicable law, the Company shall promptly
prepare an appropriate amendment or supplement to the Disclosure Materials (in
form and substance reasonably satisfactory to the Purchaser) so that (i) as so
amended or supplemented the Disclosure Materials will not include an untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances existing at
the time it is delivered to Purchaser, not misleading and (ii) the Disclosure
Materials will comply with applicable law.
Section 4.7. Blue Sky Laws. The Company shall cooperate with the
Purchaser in connection with the qualification of the Shares and the Underlying
Shares under the securities or Blue Sky laws of such jurisdictions as the
Purchaser may request and to continue such qualification at all times through
the third anniversary of the Closing Date; provided, however, that neither the
Company nor its Subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified.
Section 4.8. Integration. The Company shall not and shall use its
best efforts to ensure that no Affiliate shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or
sale of the Shares or the Underlying Shares in a manner that would require the
registration under the Securities Act of the sale of the Shares or Underlying
Shares to the Purchaser.
Section 4.9. Furnishing of Rule 144A Materials. The Company shall,
for so long as any of the Shares or Underlying
<PAGE> 18
Shares remain outstanding and during any period in which it is not subject to
Section 13 or 15(d) of the Exchange Act, make available to any registered
holder of Shares or Underlying Shares in connection with any sale thereof and
any prospective purchaser of such Shares or Underlying Shares from such Person,
the following information in accordance with Rule 144A(d)(4) under the
Securities Act: a brief statement of the nature of the business of the Company
and the products and services it offers and the Company's most recent audited
balance sheet and profit and loss and retained earnings statements, and similar
audited financial statements for such part of the two preceding fiscal years as
the Company has been in operation.
Section 4.10. Solicitation Materials. The Company shall not (i)
distribute any offering materials in connection with the offering and sale of
the Shares or Underlying Shares other than the Disclosure Materials and any
amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares or Underlying Shares by means of
any form of general solicitation or advertising.
Section 4.11. Subsequent Financial Statements. The Company shall
furnish to the Purchaser, promptly after they are filed with the Commission, a
copy of all financial statements for any period subsequent to the period
covered by the financial statements included in the Disclosure Materials.
Section 4.12. Right of First Refusal. (a) The Company shall not
directly or indirectly, without the prior consent of the Purchaser, offer,
sell, grant any option to purchase, or otherwise dispose (or announce any
offer, sale, grant or any option to purchase or other disposition) of any of
its or its Affiliates equity or equity-equivalent securities (a "Subsequent
Sale") for a period of 90 days after Closing Date, except (i) the granting of
options to employees, officers and directors under, and the issuance of shares
upon exercise of options granted under, any stock option plan heretofore or
hereinafter adopted by the Company; (ii) shares issued upon exercise of any
currently outstanding warrants and upon conversion of any currently outstanding
convertible preferred stock disclosed in Schedule 3.1 and (iii) shares of
Common Stock issued upon conversion of Shares in accordance herewith, unless
(A) the Company provides the Purchaser a written notice (the "Subsequent
Financing Notice") of its intention to effect such Subsequent Financing, which
Subsequent Financing Notice shall
<PAGE> 19
describe in reasonable detail the proposed terms of such Subsequent Financing
and the amount of proceeds intended to be raised thereunder and (B) the
Purchaser shall not have notified the Company within forty-eight (48) hours of
its receipt of the Subsequent Financing Notice of its willingness to enter into
good faith negotiations to provide (or to cause its sole designee to provide)
financing to the Company on substantially the terms set forth in the Subsequent
Financing Notice. If the Purchaser shall fail to notify the Company of its
intention to enter into such negotiations within such forty-eight (48) hour
period, the Company may effect the Subsequent Financing substantially upon the
terms set forth in the Subsequent Financing Notice; provided, that the Company
shall provide the Purchaser with a second Subsequent Financing Notice, and the
Purchaser shall again have the right of first refusal set forth above in this
paragraph (a), if the Subsequent Financing subject to the initial Subsequent
Financing Notice shall not have been consummated for any reason on the terms
set forth in such Subsequent Financing Notice within 30 days after the date of
the initial Subsequent Financing Notice.
(b) Notwithstanding anything herein to the contrary contained, the
Company shall have the option, exercisable by notice to the Purchaser given at
any time prior to the expiration of 90 days after the date that the
registration statement contemplated by the Registration Rights Agreement is
declared effective by the Commission, to place with the Purchaser or its sole
designee up to Three Million dollars ($3,000,000) in additional shares of
Preferred Stock pursuant to the terms and conditions of agreements
substantially similar to this Agreement and the Registration Rights Agreement
to be prepared and negotiated by the Company and the Purchaser (or its sole
designee) at such time.
(c) From the date hereof through the Closing Date, the Company shall
not and shall cause the Subsidiaries not to, without the consent of the
Purchaser, (i) amend its Certificate of Incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Purchaser; (ii) split,
combine or reclassify its outstanding capital stock; (iii) declare, authorize,
set aside or pay any dividend or other distribution with respect to the Common
Stock; (iv) redeem, repurchase or offer to repurchase or otherwise acquire
shares of its Common Stock; or (v) enter into any agreement with respect to any
of the foregoing.
<PAGE> 20
Section 4.13. Purchaser Ownership of Common Stock. The Purchaser may
not use its ability to convert Shares hereunder or under the Certificate of
Designation to the extent that such conversion would result in the Purchaser
owning more than 4.9% of the outstanding shares of the Common Stock; provided,
however, that this Section 4.13 shall not effect the Company's right under
Section 5(b) of the Certificate of Designation to force the Purchaser to
convert its outstanding Shares under the circumstances set forth in such
section. The Company shall, promptly upon its receipt of a Holder Conversion
Notice tendered by the Purchaser (or its sole designee) under the Certificate
of Designation, notify the Purchaser of the number of shares of Common Stock
outstanding on such date and the number of Underlying Shares which would be
issuable to the Purchaser (or its sole designee, as the case may be) if the
conversion requested in such Conversion Notice were effected in full,
whereupon, notwithstanding anything to the contrary set forth in the
Certificate of Designation, the Purchaser may revoke such conversion to the
extent that it determines that such conversion would result in the Purchaser
owning in excess of 4.9% of such outstanding shares of Common Stock.
Section 4.14. Listing of Underlying Shares. The Company shall take
all steps necessary to cause the Underlying Shares to be approved for listing
in The NASDAQ National Market (or other national securities exchange or market
on which the Common Stock is listed) no later than the first day after which
shares may be converted hereunder by the Purchaser, and shall provide to the
Purchaser evidence of such listing.
Section 4.15. Conversion Procedures. Exhibit D attached hereto sets
forth the procedures with respect to the conversion of the Shares, including
the forms of conversion notice to be provided upon conversion, instructions as
to the procedures for conversion, the form of legal opinion, if necessary, that
shall be rendered to the Company's transfer agent and such other information
and instructions as may be reasonably necessary to enable the Purchaser to
exercise its right of conversion smoothly and expeditiously.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
<PAGE> 21
Section 5.1. Conditions Precedent to Obligations of the Purchaser.
The obligation of the Purchaser to purchase the Shares is subject to the
satisfaction or waiver by the Purchaser, at or prior to the Closing, of each of
the following conditions:
(a) Legal Opinion. The Purchaser shall have received the legal
opinion, addressed to it and dated the Closing Date, of Jones & Blouch, counsel
for the Company, substantially in the form of Exhibit C;
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at
that time (except that representations and warranties that are made as of a
specific date need be true in all material respects only as of such date);
(c) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights Agreement
to be performed, satisfied or complied with by the Company at or prior to the
Closing;
(d) No Material Adverse Effect. Since the date of the financial
statements included in the Company's last filed Quarterly Report on Form 10-Q,
no event which had a Material Adverse Effect shall have occurred which is not
disclosed in the Disclosure Materials;
(e) No Prohibitions. The purchase of and payment for the Shares
(and upon conversion thereof, the Underlying Shares) hereunder (i) shall not be
prohibited or enjoined (temporarily or permanently) by any applicable law or
governmental regulation and (ii) shall not subject the Purchaser to any
penalty, or in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation that would materially
reduce the benefits to the Purchaser of the purchase of the Shares or the
Underlying Shares (provided, however, that such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement);
<PAGE> 22
(f) Company Certificates. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or an Assistant
Secretary of the Company and certifying (i) that attached thereto is a true,
correct and complete copy of (A) the Company's Certificate of Incorporation, as
amended to the date thereof, (B) the Company's By-Laws, as amended to the date
thereof, and (C) resolutions duly adopted by the Board of Directors of the
Company authorizing the execution and delivery of this Agreement and the
Registration Rights Agreement and the issuance and sale of the Shares and the
Underlying Shares and (ii) the incumbency of officers executing this Agreement
and the Registration Rights Agreement;
(g) Registration Rights Agreement. The Company shall have executed
the Registration Rights Agreement;
(h) No Suspensions of Trading in Common Stock. Trading in the
Common Stock shall not have been suspended by the Commission or the NASD or
other exchange or market on which the Common Stock is listed or quoted (except
for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company);
(i) Required Approvals. All Required Approvals shall have been
obtained; and
(j) Delivery of Stock Certificates. The Company shall have
delivered to the Purchaser the stock certificate(s) representing the Shares,
registered in the name of the Purchaser, each in form satisfactory to the
Purchaser.
Section 5.2. Conditions Precedent to Obligations of the Company.
The obligation of the Company to issue and sell the Shares hereunder is subject
to the satisfaction or waiver by the Company, at or to the Closing, of each of
the following conditions:
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except that representations and warranties that are
made as of a specific date need be true in all material respects only as of
such date);
<PAGE> 23
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration
Rights Agreement to be performed, satisfied or complied with by it at or prior
to the Closing; and
(c) No Prohibitions. The sale of the Shares (and upon conversion
thereof, the Underlying Shares) hereunder (i) shall not be prohibited or
enjoined (temporarily or permanently) by any applicable law or governmental
regulation and (ii) shall not subject the Company to any penalty, or in its
reasonable judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially reduce the
benefits to the Company of the sale of Shares or the Underlying Shares to the
Purchaser (provided, however, that such regulation, law or onerous condition
was not in effect in such form at the date of this Agreement).
ARTICLE VI
TERMINATION
Section 6.1. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to Closing by the mutual consent of the Company
and the Purchaser.
Section 6.2. Termination by the Company or the Purchaser. This
Agreement may be terminated prior to Closing by either the Company or the
Purchaser, by giving written notice of such termination to the other party, if:
(a) the Closing shall not have occurred by July 7, 1996;
provided that the terminating party is not then in material breach of its
obligations under this Agreement in any manner that shall have caused the
failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law or
regulation that prohibits the consummation of the Closing or if the
consummation of the Closing would violate any non-appealable final
judgment, order, decree, ruling or injunction of any court of or
governmental authority having competent jurisdiction; or
<PAGE> 24
(c) there shall have been an amendment to Regulation D or an
interpretive release promulgated or issued thereunder, which, in the
reasonable judgment of the terminating party, would materially adversely
affect the transactions contemplated hereby and by the Registration Rights
Agreement.
Section 6.3. Termination by the Company. This Agreement may be
terminated prior to Closing by the Company, by giving notice of such
termination to the Purchaser, if the Purchaser has materially breached any
representation, warranty, covenant or agreement contained in this Agreement or
the Registration Rights Agreement and such breach is not cured within five
business days following receipt by the Purchaser of notice of such breach.
Section 6.4. Termination by the Purchaser. This Agreement may be
terminated prior to Closing by the Purchaser, by giving notice of such
termination to the Company, if:
(a) the Company has breached any representation, warranty,
covenant or agreement contained in this Agreement or the Registration
Rights Agreement and such breach is not cured within five business days
following receipt by the Company of notice of such breach;
(b) there has occurred an event since the date of the financial
statements included in the Company's last filed Quarterly Report on Form
10-Q which could reasonably be expected to have a Material Adverse Effect
and which is not disclosed in the Disclosure Materials; or
(c) trading in the Common Stock has been suspended by the
Commission or the NASD or other exchange or market on which the Common
Stock is listed or quoted (except for any suspension of trading of limited
duration solely to permit dissemination of material information regarding
the Company).
ARTICLE VII
MISCELLANEOUS
Section 7.1. Fees and Expenses. Each party shall pay
<PAGE> 25
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and other taxes and duties levied
in connection with the issuance of the Shares (and upon conversion thereof, the
Underlying Shares) pursuant hereto. The Purchaser shall be responsible for its
own tax liability that may arise as a result of the investment hereunder or the
transactions contemplated by this Agreement. Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company shall pay (i) all costs, expenses, fees and all taxes incident to
and in connection with: (A) the preparation, printing and distribution of the
Disclosure Materials and all amendments and supplements thereto (including,
without limitation, financial statements and exhibits), and all preliminary and
final Blue Sky memoranda and all other agreements, memoranda, correspondence
and other documents prepared and delivered in connection herewith (B) the
issuance and delivery of the Shares and, upon conversion thereof, the
Underlying Shares, (C) the qualification of the Shares and, upon conversion
thereof, the Underlying Shares for offer and sale under the securities or Blue
Sky laws of the several states (including, without limitation, the fees and
disbursements of the Purchasers' counsel relating to such registration or
qualification), (D) furnishing such copies of the Disclosure Materials and all
amendments and supplements thereto, as may reasonably be requested for use in
connection, with resales of the Shares and, upon conversion thereof, the
Underlying Shares, and (E) the preparation of certificates for the Shares and,
upon conversion thereof, the Underlying Shares (including, without limitation,
printing and engraving thereof), (ii) all fees and expenses of the counsel and
accountants of the Company and (iii) all expenses and listing fees in
connection with the application for quotation of the underlying Shares in the
NASDAQ National Market.
Section 7.2. Entire Agreement; Amendments. This Agreement,
together with the Exhibits, Annexes and Schedules hereto, and the Registration
Rights Agreement contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
Section 7.3. Notices. Any notice or other communication required
or permitted to be given hereunder shall
<PAGE> 26
be in writing and shall be deemed to have been received (a) upon hand delivery
(receipt acknowledged) or delivery by telex (with correct answer back
received), telecopy or facsimile (with transmission confirmation report) at the
address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be:
If to the Company: Network Imaging Corporation
500 Huntmar Park Drive
Herndon, VA 22070
Facsimile No.: (703) 904-3292
Attn: Jorge R. Forgues
With copies to: Jones & Blouch L.L.P.
1025 Thomas Jefferson Street, N.W.
Suite 405 West
Washington, D.C. 20007
Facsimile No.: (202) 223-4593
Attn: John W. Blouch
If to the Purchaser: Robert L. Miller, D/B/A
Miller Consulting, for
Newsun Limited
630 Fifth Avenue
Suite 2000
New York, NY 10111
Facsimile No.: (212) 332-3256
With copies to: Robinson Silverman Pearce
Aronsohn & Berman LLP
1209 Avenue of the Americas
New York, NY 10019
Attn: Kenneth L. Henderson
Facsimile No.: (212) 541-4630
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
<PAGE> 27
Section 7.4" Amendments; Waivers. No provision of this Agreement
may be waived or amended except in a written instrument signed, in the case of
an amendment, by both the Company and the Purchaser, or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
Section 7.5. Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 7.6. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. Neither the Company nor the Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other. The assignment by a party of this Agreement or any
rights hereunder shall not affect the obligations of such party under this
Agreement.
Section 7.7. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 7.8. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof.
Section 7.9. Survival. The representations and warranties of the
Company and the Purchaser contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article VII shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Shares hereunder.
Section 7.10. Counterpart Signatures. This Agreement
<PAGE> 28
may be executed in two or more counterparts, all of which when taken together
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) the same with the same force
and effect as if such facsimile signature page were an original thereof.
Section 7.11. Publicity. The Company and the Purchaser shall
consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed.
Section 7.12. Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affecting or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
Section 7.13. Remedies. In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages,
the Purchaser will be entitled to specific performance of the obligations of
the Company under this Agreement and the Company will be entitled to specific
performance of the obligations of the Purchaser hereunder with respect to the
subsequent transfer of Shares and the Underlying Shares. Each of the Company
and the Purchaser agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action
for specific performance of any such obligation the defense that a remedy at
law would be adequate.
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first indicated above.
Company:
NETWORK IMAGING CORPORATION
By: /s/ Robert P. Bernardi
Name: Robert P. Bernardi
Title: Chairman
Purchaser:
NEWSUN LIMITED
By: /s/ Raz Steinmetz
Name: Raz Steinmetz
Title: Proxy
<PAGE> 30
Exhibit A
Certificate of Designation of Series I Convertible Stock filed as
Exhibit to the Quarterly Report on Form 10-Q for the period ended June,
1996.
<PAGE> 31
Exhibit B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June 28, 1996, by and among Network Imaging Corp., a
Delaware corporation (the "Company"), and Newsun Limited, a British Virgin
Islands corporation (the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated as of June 28, 1996 by and among the Company and the
Purchaser (the "Purchase Agreement").
The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement.
As used in this Agreement, the following terms shall have the following
meanings:
"Advice" shall have meaning set forth in Section 4(o).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used
with respect to any Person, means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Blackout" shall have the meaning set forth in Section 3(b).
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking
<PAGE> 32
institutions in the state of New York generally are authorized or
required by law or other government actions to close.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.0001
per share.
"Effectiveness Date" means the 75th day following the Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 5.
"Event Date" shall have the meaning set forth in Section 5.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 17th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 7(c).
"Indemnifying Party" shall have the meaning set forth in Section
7(c).
"Losses" shall have the meaning set forth in Section 7(a).
"New York Courts" shall have the meaning set forth in Section 9(i).
"Person" means an individual or a corporation,
<PAGE> 33
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means the shares of Series I Preferred
purchased by the Purchaser pursuant to the Purchase Agreement and the shares of
Common Stock into which such shares of Series I Preferred are convertible
pursuant to the Purchase Agreement.
"Registration Statement" means the registration statement,
contemplated by Section 2(a), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 144A" means Rule 144A promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted
<PAGE> 34
by the Commission having substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 5.
"Underwritten registration or underwritten offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a "shelf" Registration Statement covering all
Registrable Securities (which Registrable Securities shall include 2,250,000
shares of Common Stock or such other number of shares agreed to by the parties
to the Purchase Agreement) for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 or
another appropriate form permitting registration of Registrable Securities for
resale by the Holders in the manner or manners designated by them (including,
without limitation, public or private sales and one or more underwritten
offerings). The Company shall (i) not permit any securities other than the
Registrable Securities to be included in the Registration Statement and (ii)
use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as practicable after the filing
thereof, but in
<PAGE> 35
any event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until the date which
is three years after the Closing Date or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold or may be sold
pursuant to Rule 144(A) as determined by the counsel to the Company pursuant to
a written opinion letter, addressed to the Holders, to such effect (the
"Effectiveness Period"); provided, however, that the Company shall not be
deemed to have used its best efforts to keep the Registration Statement
effective during the Effectiveness Period if it voluntarily takes any action
that would result in the Holders not being able to sell the Registrable
Securities covered by such Registration Statement during the Effectiveness
Period, unless such action is required under applicable law or the Company has
filed a post-effective amendment to the Registration Statement and the
Commission has not declared it effective or except as otherwise permitted by
Section 3(a).
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an underwritten offering. In such
event, and if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such offering exceeds the amount of Registrable Securities which can
be sold in such offering, there shall be included in such underwritten offering
the amount of such Registrable Securities which in the opinion of such managing
underwriters can be sold, and such amount shall be allocated pro rata among the
Holders proposing to sell Registrable Securities in such underwritten offering.
(c) If any of the Registrable Securities are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders
of a majority of the Registrable Securities included in such offering. No
Holder may participate in any underwritten offering hereunder unless such
Person (i) agrees to sell its Registrable Securities on the basis provided in
any underwriting agreements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such arrangements.
3. Hold-Back Agreements
<PAGE> 36
(a) Restrictions on Public Sale by the Holders. Subject to
paragraph (b) of this Section 3, the Purchaser hereby understands and agrees
that the registration rights of the Purchaser pursuant to this Agreement and
its ability to offer and sell Registrable Securities pursuant to the
Registration Statement are limited by the provisions of the immediately
following sentence. If the Company determines in its good faith judgment that
the filing of the Registration Statement in accordance with Section 2 or the
use of any Prospectus would require the disclosure of material information
which the Company has a bona fide business purpose for preserving as
confidential or the disclosure of which would impede the Company's ability to
consummate a significant transaction, upon written notice of such determination
by the Company, the rights of the Purchaser to offer, sell or distribute any
Registrable Securities pursuant to the Registration Statement or to require the
Company to take action with respect to the registration or sale of any
Registrable Securities pursuant to the Registration Statement (including any
action contemplated by Section 4) will for up to 60 days in any 12-month period
be suspended until the date upon which the Company notifies the Holders in
writing that suspension of such rights for the grounds set forth in this
Section 3(a) is no longer necessary; provided that there may be no such further
suspension after the initial twelve-month period in which such suspension has
occurred.
(b) Limitation on Blackouts. Notwithstanding anything contained
herein to the contrary, the aggregate number of days (whether or not
consecutive) during which the Company may delay the effectiveness of the
Registration Statement or prevent offerings, sales or distributions by the
Purchaser pursuant to paragraph (a) above or the last paragraph of Section 4
(collectively, a "Blackout") shall in no event exceed 90 days during any
12-month period and no Blackout may continue in consecutive 12 month periods.
4. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission within the time period set
forth in Section 2 a Registration Statement on Form S-3 in accordance with the
method or methods of distribution thereof as specified by the Holders, and
cause the Registration Statement to
<PAGE> 37
become effective and remain effective as provided herein; provided, however,
that not less than 5 Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to the Holders, their
Special Counsel and any managing underwriters, copies of all such documents
proposed to be filed, which documents (other than those incorporated or deemed
to be incorporated by reference) will be subject to the review of such Holders,
their Special Counsel and such managing underwriters, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the opinion of respective
counsel to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
applicable time period; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters immediately (and, in the case of
(i)(A) below, not less than 5 days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
<PAGE> 38
post-effective; amendment to the Registration Statement is proposed to be filed
and, (B) with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (vi) of the occurrence of
any event that makes any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority of the Registrable Securities to be sold in connection with an
underwritten offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable
<PAGE> 39
after the Company has received notification of the matters to be incorporated
in such Prospectus supplement or post-effective amendment; provided, however,
that the Company shall not be required to take any action pursuant to this
Section 4(e) that would, in the opinion of counsel for the Company, violate
applicable law.
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one executed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale
of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their respective counsel in connection with the registration
or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any
and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or subject the Company to
any material tax in any such jurisdiction where it is not then so subject.
<PAGE> 40
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing underwriters or
Holders may request at least two Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by Section
4(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each securities
exchange or market, if any, on which similar securities issued by the Company
are then listed.
(l) Enter into such agreements (including an underwriting agreement
in form, scope and substance as is customary in underwritten offerings ) and
take all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to
underwriters in underwritten public offerings, and confirm the same if and when
requested; (ii) obtain and deliver copies thereof to each Holder and the
managing underwriters, if any, of opinions of counsel to the Company and
updates thereof addressed to each selling Holder and each such underwriter, in
form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling Holders covering the matters
customarily covered in opinions requested in
<PAGE> 41
underwritten offerings and such other matters as may be reasonably requested by
such Special Counsel and underwriters; (iii) immediately prior to the
effectiveness of the Registration Statement, and, in the case of an
underwritten offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to each selling Holder and each of the
underwriters, if any, in form and substance as are customary in connection with
underwritten offerings; (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less favorable
to the selling Holders and the underwriters, if any, than those set forth in
Section 7 (or such other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such underwritten offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 4(l)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case requested by any such
Holder, representative, underwriter, attorney or accountant in connection with
the Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential
by such Persons, unless
<PAGE> 42
(i) disclosure of such information is required by court or administrative order
or is necessary to respond to inquiries of regulatory authorities; (ii)
disclosure of such information, in the opinion of counsel to such Person, is
required by law; (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by such
Person; or (iv) such information becomes available to such Person from a source
other than the Company and such source is not bound by a confidentiality
agreement.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90
days after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date
of the Registration Statement, which statement shall cover said 12-month
period, or end shorter periods as is consistent with the requirements of Rule
158.
(o) Provide a CUSIP number for all Registrable Securities, not later
than the effective date of the Registration Statement.
The Company may require each selling Holder to furnish to the Company
such information regarding the distribution of such Registrable Securities as
is required by law to be disclosed in the Registration Statement and the
Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i) the inclusion therein of language, in form
and substance reasonably satisfactory to such Holder, to the effect that the
ownership by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such ownership does not imply that such
Holder will assist in meeting any future financial requirements of
<PAGE> 43
the Company, or (ii) if such reference to such Holder by name or otherwise is
not required by the Securities Act or any similar Federal statute then in
force, the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Purchaser covenants and agrees that (i) it will not offer or
sell any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 4(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 4(c) and (ii) the Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of
Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 4(c)(ii), 4(c)(iii), 4(c)(iv), 4(c)(v) or
4(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 4(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
5. Liquidated Damages. The Company acknowledges and agrees that the
Holders will suffer damages, and that it would not be feasible to ascertain the
extent of such damages with precision, if the Company fails to fulfill its
obligations hereunder and (a) a Registration Statement is not filed with the
Commission on or prior to the Filing Date, (b) a Registration Statement is not
declared effective by the Commission on or prior to the Effectiveness Date or
(c) a Registration Statement is filed and declared effective but thereafter
ceases to be effective at any time during the Effectiveness Period without
being succeeded within 30 days by a subsequent Registration Statement filed
with and declared effective by the Commission (any such failure being
<PAGE> 44
hereinafter referred to as an "Event", and for purposes of clauses (a) and (b)
the date on which such Event occurs, or for purposes of clause (c) the date on
which such 30-day limit is exceeded, being hereinafter referred to as an "Event
Date").
Upon the occurrence of an Event, the Company agrees to increase the
discount applicable to a conversion of Series I Preferred in accordance with
Section 5(d)(i) of the Certificate of Designation by two percent (2%) per month
for each of the first two months after each Event Date. Commencing on the
third month after an Event Date, the two percent (2%) monthly penalty shall be
paid to the Holder in cash. Such increase in discount and/or payment in cash,
as the case may be, shall be paid as liquidated damages, and not as a penalty,
to each Holder; provided, that such liquidated damages will, in each case,
cease to accrue (subject to the occurrence of another Event) on the date in
which the applicable Registration Statement is no longer subject to an order
suspending the effectiveness thereof or Proceedings relating thereto or a
subsequent Shelf Registration is declared effective.
The Company shall notify each Holder within five days of each Event
and Event Date. The Company shall pay the liquidated damage due on the
Registrable Securities to each Holder of record as at the Event Date on the
first Business Day of each month in which such liquidated damages shall accrue
by check delivered to the address for notice of such Holder set forth herein.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to
be made with the National Association of Securities Dealers, Inc. and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the underwriters or Holders
in connection with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
Holders of a majority of Registrable Securities may
<PAGE> 45
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is requested by the managing underwriters, if
any, or by the holders of a majority of the Registrable Securities included in
the Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company and Special Counsel for
the Holders (subject to the provisions of Section 6(b)), (v) fees and
disbursements of all independent certified public accountants referred to in
Section 4(1)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
(vi) Securities Act liability insurance, if the Company so desires such
insurance, and (vii) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange on which similar securities issued by the Company are then
listed.
(b) In connection with the Registration Statement, the Company shall
reimburse the Holders for the reasonable fees and disbursements of one firm of
attorneys chosen by the Holders of a majority of the Registrable Securities.
7. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding termination of this Agreement and without limitation as to
time, indemnify and hold harmless each Holder, the officers, directors, agents,
brokers, investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or
<PAGE> 46
relating to any untrue or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectus or any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing to
the Company by or on behalf of such Holder expressly for use therein, which
information was reasonably relied on by the Company for use therein or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. In connection with the Registration
Statement, each Holder shall furnish to the Company in writing such information
as the Company reasonably requests for use in connection with the Registration
Statement or any Prospectus and agrees, jointly and not severally, to indemnify
and hold harmless the Company, their directors, officers, agents and employees,
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses (as determined
by a court of competent jurisdiction in a final judgment not subject to appeal
or review) arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
in writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company
<PAGE> 47
for use in the Registration Statement, such Prospectus or such form of
prospectus or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus. In no
event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (3) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense
<PAGE> 48
thereof and such counsel shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10
Business Days of written notice thereof to the Indemnifying Party (regardless
of whether it is ultimately determined that an Indemnified Party is not
entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 7(a)
or 7(b) is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section
would apply by its terms (other than by reason of exceptions provided in this
Section), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in
ques-tion, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by,
or relates to information supplied by, such Indemnifying Party or Indemnified
Party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The
amount paid or payable by a party as a result of any
<PAGE> 49
Losses shall be deemed to include, subject to the limitations set forth in
Section 7(c), any attorneys' or other fees or expenses incurred by such party
in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7(d), the Purchaser
shall not be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by the Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that the Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
8. Rule 144
The Company shall file the reports required to be filed by it under
the Securities Act and the Exchange Act in a timely manner and, if at any time
the Company is not required to file such reports, they will, upon the request
of any Holder, make publicly available other information so long as necessary
to permit sales of its securities pursuant to Rule 144. The Company further
covenants that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144. Upon the request
of any Holder, the Company shall deliver to such Holder a written certification
of a duly authorized officer as to whether it has complied with such
requirements.
<PAGE> 50
9. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except as specifically set forth in
Schedule 3.1 to the Purchase Agreement, none of the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions
hereof. Except as set specifically forth in Schedule 3.1 to the Purchase
Agreement, none of the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person. Without limiting the generality of the
foregoing, without the written consent of the Holders of a majority of the then
outstanding Registrable Securities, the Company shall not grant to any Person
the right to request the Company to register any securities of the Company
under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) No Piggyback on Registrations. Except as specifically set forth
in Schedule 3.1 to the Purchase Agreement, none of the Company nor any of its
securityholders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement other than the
Common Stock to be issued under the Purchase Agreement, and the Company shall
not enter into any agreement providing any such right to any of its
securityholders.
(d) Entire Agreement; Amendments. This Agreement,
<PAGE> 51
together with the Exhibits, Annexes and Schedules hereto, contain
the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(f) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated below (if
delivered on a business day during normal business hours where such notice is
to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company: Network Imaging Corporation
500 Huntmar Park Drive
Herndon, VA 22070
Facsimile No.: (703) 478-7523
Attn: Chief Executive Officer
<PAGE> 52
With copies to: Jones & Blouch L.L.P.
1025 Thomas Jefferson Street,
N.W.
Suite 405
Washington, D.C. 20007
Facsimile No.: (202) 223-4593
Attn: John W. Blouch
If to the Purchaser: Miller Consulting for Newsun Limited
630 Fifth Avenue
Suite 2000
New York, NY 10111
Facsimile No.: (212)332-3256
Attn: Robert L. Miller
With copies to: Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10019
Attn: Kenneth L. Henderson
Facsimile No.: (212) 541-4630
If to any other Person who is then the registered Holder:
To the address of such Holder as
it appears in the stock transfer
books of the Company
or such other address as may be
designated in writing hereafter,
in the same manner, by such
Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any
<PAGE> 53
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
(i) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to principles of conflicts of law. The
Company hereby irrevocably submits to the jurisdiction of any New York state
court sitting in the Borough of Manhattan in the City of New York or any
federal court sitting in the Borough of Manhattan in the City of New York
(collectively, the "New York Courts") in respect of any Proceeding arising out
of or relating to this Agreement, and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, jurisdiction of the New
York Courts. The Company irrevocably waives to the fullest extent it may
effectively do so under applicable law any objection that it may now or
hereafter have to the laying of the venue of any such Proceeding brought in any
New York Court and any claim that any such Proceeding brought in any New York
Court has been brought in an inconvenient forum. Nothing herein shall affect
the right of any Holder to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against the company in any
other jurisdiction.
(j) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE> 54
(l) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(m) Shares held by The Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than the Purchaser or transferees or successors or
assigns thereof if such Persons are deemed to be Affiliates solely by reason of
their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
<PAGE> 55
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
NETWORK IMAGING CORPORATION
By:
Name:
Title:
NEWSUN LIMITED
By:
<PAGE> 56
Exhibit C
[Form of Opinion of Jones & Blouch L.L.P.]
Gentlemen:
We have acted as counsel to Network Imaging Corporation, a Delaware
corporation (the "Company"), in connection with the execution and delivery of
the Convertible Preferred Stock Purchase Agreement, dated as of June 28, 1996
(the "Purchase Agreement"), by and between the Company and Newsun Limited (the
"Purchaser"), pursuant to which the Company is issuing to the Purchaser shares
of its Series I Convertible Preferred Stock, par value $.0001 per share (the
"Shares"). Terms used and not otherwise defined herein shall have the
respective meanings set forth in the Purchase Agreement.
This opinion is delivered to you pursuant to Section 5.1(a) of the
Purchase Agreement.
In connection with this opinion, we have examined:
(a) An executed copy of the Purchase Agreement;
(b) The Certificate of Designation of Series I Convertible Preferred
Stock of the Company, as filed with the Secretary of the State
of Delaware on June 28, 1996 (the "Certificate of Designation");
(c) The Certificate of Incorporation and By-laws of the Company,
each as amended to date hereof;
(d) An executed copy of the Registration Rights Agreement, dated as
of June 28, 1996 (the "Registration Rights Agreement"), between
the Company and the Purchaser;
(e) Records of proceedings and actions of the Board of Directors of
the Company relating to the transactions contemplated by the
Purchase Agreement and the Registration Rights Agreement;
(f) Officer's Certificate for the Company, dated June 28, 1996 (the
"Officer's Certificate"); and
(g) The Certificate of Incorporation and By-laws of Symmetrical
Technologies, Incorporated (the "Domestic Subsidiary"), each as
amended to date hereof.
<PAGE> 57
We have also investigated such questions of law, including, without
limitation, Regulation D ("Regulation D") promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), and examined such additional
corporate records of the Company and such other documents and public records as
we have deemed necessary or appropriate to render the opinions contained
herein.
We have assumed the genuineness of all signatures (except those of
officers of the Company), the authenticity of all documents submitted to us as
originals and the conformity to original documents of documents submitted to us
as certified, conformed or photostatic copies. We have also assumed, without
verification, the legal capacity of each individual who has executed documents
or instruments in connection with the transaction contemplated hereby. With
respect to certain factual matters, we have relied, without independent
investigation on the facts stated in the representations and warranties
contained in the Purchase Agreement and the Schedules thereto, the SEC
Documents, the Registration Rights Agreement and the Officers' Certificate
(other than in each case facts constituting conclusions of law).
We have also assumed, without verification (i) that the parties to
the Purchase Agreement and the other agreements, instruments and documents
executed in connection therewith, other than the Company, have the power
(including, without limitation, corporate power where applicable) and authority
to enter into and perform the Purchase Agreement and such other agreements,
instruments and documents, (ii) the due authorization, execution and delivery
by such other parties of the Purchase Agreement and such other agreements,
instruments and documents, and (iii) that the Purchase Agreement and such other
agreements, instruments and documents constitute legal, valid and binding
obligations of each such other party, enforceable against such other party in
accordance with their respective terms.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of the Company and the Domestic Subsidiary is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and assets and to carry on
its business as currently
<PAGE> 58
conducted.
2. The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by the Purchase
Agreement and the Registration Rights Agreement and otherwise to carry out its
obligations under such agreements. The execution and delivery of the Purchase
Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company. Each of the
Purchase Agreement and the Registration Rights Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies
or by other equitable principles
of general application and except as rights to indemnity or contribution may
be limited by applicable law.
3. No shares of common stock, par value $.0001 per share (the
"Common Stock"), of the Company are entitled to preemptive or similar rights.
Except as specifically disclosed in Schedules 3.1 to the Purchase Agreement, to
our knowledge, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or,
except as a result of the purchase and sale of the Shares under the Purchase
Agreement, securities, rights or obligations convertible into or exchangeable
for, or giving any person any right to subscribe for or acquire any shares of
Common Stock, or contracts, commitments, understandings, or arrangements by
which the Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or exchangeable
into shares of Common Stock.
4. The Shares are duly authorized and, when paid for in accordance
with the terms of the Purchase Agreement, shall have been validly issued, fully
paid and nonassessable.
5. The shares of Common Stock into which the Shares are convertible
(the "Underlying Shares") have been duly authorized and reserved for issuance
by the Company and, when issued by the Company in accordance with the terms of
the Purchase Agreement and the Certificate of Designation, will be validly
issued, fully paid
<PAGE> 59
and nonassessable.
6. Assuming the accuracy of the representations and warranties of
the Company set forth in Section 3.1(k) of the Purchase Agreement and of the
Purchasers set forth in Section 3.2 of the Purchase Agreement, the offer,
issuance and sale of the Shares or the Underlying Shares to the Purchaser
pursuant to the Purchase Agreement are exempt from the registration
requirements of the Securities Act by reason of Regulation D promulgated
thereunder.
7. The execution, delivery and performance of the Purchase Agreement
and the Registration Rights Agreement by the Company and the consummation by
the Company of the transactions contemplated by such agreements do not and will
not (i) conflict with or violate any provision of its certificate of
incorporation or bylaws, (ii) to our knowledge, conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which the Company is a party, or (iii) to our knowledge, result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company is
subject (excluding Federal and state securities laws and regulations as to
which we express no opinion except as set forth in 6 above), or by which any
property or asset of the Company is bound or affected. To our knowledge, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority.
8. Other than the Required Approvals, to our knowledge, the Company
is not required to obtain any consent, waiver, authorization, or order of, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other person in connection with the
execution, delivery and performance by the Company of the Purchase Agreement
and the Registration Rights Agreement, except that we express no opinion on
Federal and state securities laws and regulations except as set forth in 6
above.
9. To our knowledge, the Company has filed all reports required to
be filed by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the
<PAGE> 60
date hereof (or such shorter period as the Company was required by
law to file such material) on a timely basis, or has received a
valid extension of such time of filing.
We do not undertake to advise you or anyone else of any changes in
the opinions expressed herein resulting from changes in law, changes in facts
or any other matters that hereafter might occur or be brought to our attention
that did not exist on the date hereof and of which we had no knowledge.
We express no opinion as to the law of any jurisdiction other than
the federal law of the United States, the laws of the District of Columbia and,
to the extent relevant to the opinions expressed herein, the General
Corporation Law of the State of Delaware (the "DGCL"). To the extent the laws
of any state other than the DGCL govern any of the opinions expressed herein,
we have assumed that the laws of such state are the same as the laws of the
District of Columbia.
Very truly yours,
<PAGE> 61
Exhibit D
Conversion Procedures
Conversion shall be effectuated by surrendering the Preferred Stock to be
converted by overnight courier to the Company with a Notice of Conversion, a
copy of which is attached hereto (with an advance copy of such conversion
notice to the Company and its counsel by facsimile at (703) 904-3292 and (202)
223-4593, respectively), executed by the holder evidencing such holder's
intention to convert the number of shares of Preferred Stock subject to such
notice, and accompanied, in the event the holder desires to register the shares
of Common Stock in a name other than that of holder, by proper assignment
hereof. The Company shall cause its transfer agent (the "Transfer Agent") to
deliver the shares of Common Stock subject to such notice (free of restrictive
legend except as provided in the Convertible Preferred Stock Purchase Agreement
between the Company and the original holder of the Preferred Stock) to the
holder within three business days from date of receipt of the conversion notice
and the original of the Preferred Stock certificate (or a lost certificate
affidavit and bond in form reasonably satisfactory to the Company if the
original certificate has been lost, mutilated or destroyed). If the holder is
converting less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the holder with the above mentioned
conversion notice, the Company shall promptly deliver to the holder a
certificate for such number of shares of Preferred Stock as have not been
converted.
